Question 1

Exhibit 20-3
  
-Refer to Exhibit 20-3.When price decreases from $5.50 to $4.50,the price elasticity of supply is

Accepted Answer

A)  0. 
B)  0.1. 
C)  0.5. 
D)  1.0. 
E)  5.0. 
A)  0. 
B)  0.1. 
C)  0.5. 
D)  1.0. 
E)  5.0.

Question 2

Exhibit 20-2
  
-Refer to Exhibit 20-2.The market for good X is initially in equilibrium at $5.The government then places a per-unit tax on good X,as shown by the shift of S1 to S2.Approximately what percentage of the tax do producers end up paying?

Accepted Answer

A)  55 percent 
B)  45 percent 
C)  70 percent 
D)  63 percent 
E)  25 percent 
A)  55 percent 
B)  45 percent 
C)  70 percent 
D)  63 percent 
E)  25 percent

Question 3

List and describe four factors that are relevant to the determination of price elasticity of demand.

Accepted Answer

1)Number of substitutes - The more subst

Question 4

If the price of good A decreases by 10 percent and the quantity demanded of good B decreases by 10 percent,this is evidence that goods A and B are

Accepted Answer

A)  substitutes for one another. 
B)  complement goods to one another. 
C)  both inferior goods. 
D)  both normal goods. 
E)  not related. 
A)  substitutes for one another. 
B)  complement goods to one another. 
C)  both inferior goods. 
D)  both normal goods. 
E)  not related.

Question 5

Cross elasticity of demand measures the responsiveness of changes in the quantity __________ of one good to changes in __________.

Accepted Answer

A)  demanded; the price of the same good 
B)  demanded; income 
C)  demanded; the price of another good 
D)  supplied; the price of the same good 
E)  none of the above 
A)  demanded; the price of the same good 
B)  demanded; income 
C)  demanded; the price of another good 
D)  supplied; the price of the same good 
E)  none of the above

Question 6

If supply is inelastic,it follows that

Accepted Answer

A)  a rise in price will not change quantity supplied. 
B)  a fall in price will not change quantity supplied. 
C)  consumers will pay 100 percent of any tax placed on sellers. 
D)  quantity supplied always changes more than price changes. 
E)  none of the above 
A)  a rise in price will not change quantity supplied. 
B)  a fall in price will not change quantity supplied. 
C)  consumers will pay 100 percent of any tax placed on sellers. 
D)  quantity supplied always changes more than price changes. 
E)  none of the above

Question 7

If quantity demanded rises by 10 percent as price falls by 9 percent,the price elasticity of demand equals

Accepted Answer

A)  0.90. 
B)  1.11. 
C)  0.09. 
D)  0.19. 
A)  0.90. 
B)  1.11. 
C)  0.09. 
D)  0.19.

Question 8

Exhibit 20-5
  
-Refer to Exhibit 20-5.For graph (1),what is the price elasticity of demand going between $2.00 and $1.50?

Accepted Answer

A)  0.02 
B)  0.43 
C)  2.33 
D)  42.8 
A)  0.02 
B)  0.43 
C)  2.33 
D)  42.8

Question 9

If demand is elastic,then a given percentage change in price will bring about a(n)__________ percentage change in quantity __________.

Accepted Answer

A)  larger; demanded 
B)  smaller; demanded 
C)  equal; supplied 
D)  smaller; supplied 
E)  equal; demanded 
A)  larger; demanded 
B)  smaller; demanded 
C)  equal; supplied 
D)  smaller; supplied 
E)  equal; demanded

Question 10

The producer of good X is contemplating a price change and has asked for your advice.After some empirical investigation,you conclude that the price elasticity of demand for good X is 0.75.Your best advice to the producer would be to

Accepted Answer

A)  increase the price of good X to raise total revenue. 
B)  decrease the price of good X to raise total revenue. 
C)  leave the price of good X unchanged since it will not influence total revenue. 
D)  increase the price of good X to reduce total revenue. 
A)  increase the price of good X to raise total revenue. 
B)  decrease the price of good X to raise total revenue. 
C)  leave the price of good X unchanged since it will not influence total revenue. 
D)  increase the price of good X to reduce total revenue.

Question 11

The price elasticity of demand tends to be higher for goods

Accepted Answer

A)  for which the consumer spends a high percentage of his or her income. 
B)  for which the consumer spends a low percentage of his or her income. 
C)  that are in abundant supply. 
D)  that are in scarce supply. 
A)  for which the consumer spends a high percentage of his or her income. 
B)  for which the consumer spends a low percentage of his or her income. 
C)  that are in abundant supply. 
D)  that are in scarce supply.

Question 12

If a good is a normal good,it can not also be income inelastic.

Accepted Answer

A) True 
 B)False

Question 13

The shorter the period of time consumers have to adjust to price changes,the __________ the __________ elasticity of demand.

Accepted Answer

A)  lower; income 
B)  lower; price 
C)  higher; income 
D)  higher; price 
A)  lower; income 
B)  lower; price 
C)  higher; income 
D)  higher; price

Question 14

Exhibit 20-2
  
-Refer to Exhibit 20-2.The market for good X is initially in equilibrium at $5.The government then places a per-unit tax on good X,as shown by the shift of S1 to S2.What is the per-unit tax equal to?

Accepted Answer

A)  $1.00 
B)  $2.25 
C)  $0.25 
D)  $4.00 
E)  $1.25 
A)  $1.00 
B)  $2.25 
C)  $0.25 
D)  $4.00 
E)  $1.25

Question 15

When the cross elasticity of demand between two goods is __________,the goods are __________.

Accepted Answer

A)  negative; substitutes for one another 
B)  negative; complements for one another 
C)  positive; normal goods 
D)  positive; inferior goods 
A)  negative; substitutes for one another 
B)  negative; complements for one another 
C)  positive; normal goods 
D)  positive; inferior goods

Question 16

If the seller of good X raises the price of good X,it follows that the total revenue of good X will __________,if demand is __________.

Accepted Answer

A)  rise; unit elastic 
B)  rise; elastic. 
C)  fall; unit elastic. 
D)  fall; inelastic. 
E)  fall; elastic 
A)  rise; unit elastic 
B)  rise; elastic. 
C)  fall; unit elastic. 
D)  fall; inelastic. 
E)  fall; elastic

Question 17

Exhibit 20-7
  
-Refer to Exhibit 20-7.If the government wants to impose a per-unit tax in order to raise revenues,which of the depicted markets should it choose in order to maximize tax revenues?

Accepted Answer

A)  (1) 
B)  (2) 
C)  (3) 
D)  (4) 
A)  (1) 
B)  (2) 
C)  (3) 
D)  (4)

Question 18

Exhibit 20-3
  
-Refer to Exhibit 20-3.When price decreases from $4.50 to $3.50,the price elasticity of demand is

Accepted Answer

A)  0.4375. 
B)  0.50. 
C)  1.0. 
D)  2.00. 
E)  2.86. 
A)  0.4375. 
B)  0.50. 
C)  1.0. 
D)  2.00. 
E)  2.86.

Question 19

If the demand for a good is inelastic and the price of the good decreases,then

Accepted Answer

A)  total revenue increases. 
B)  total revenue decreases. 
C)  total revenue is not affected. 
D)  the direction of the change in total revenue cannot be determined from the information given. 
A)  total revenue increases. 
B)  total revenue decreases. 
C)  total revenue is not affected. 
D)  the direction of the change in total revenue cannot be determined from the information given.

Question 20

Exhibit 20-7
  
-Refer to Exhibit 20-7.If the government is contemplating imposing a per-unit tax and it wants the tax to have as small a negative effect on consumers as possible,it should choose a good for which the market is depicted on graph

Accepted Answer

A)  (1). 
B)  (2). 
C)  (3). 
D)  (4). 
A)  (1). 
B)  (2). 
C)  (3). 
D)  (4).

Exam 20: Elasticity

Exhibit 20-3 -Refer to Exhibit 20-3.When price decreases from $5.50 to $4.50,the price elasticity of supply is

Exhibit 20-2 -Refer to Exhibit 20-2.The market for good X is initially in equilibrium at $5.The government then places a per-unit tax on good X,as shown by the shift of S1 to S2.Approximately what percentage of the tax do producers end up paying?

List and describe four factors that are relevant to the determination of price elasticity of demand.

If the price of good A decreases by 10 percent and the quantity demanded of good B decreases by 10 percent,this is evidence that goods A and B are

Cross elasticity of demand measures the responsiveness of changes in the quantity __________ of one good to changes in __________.

If supply is inelastic,it follows that

If quantity demanded rises by 10 percent as price falls by 9 percent,the price elasticity of demand equals

Exhibit 20-5 -Refer to Exhibit 20-5.For graph (1),what is the price elasticity of demand going between $2.00 and $1.50?

If demand is elastic,then a given percentage change in price will bring about a(n)__________ percentage change in quantity __________.

The producer of good X is contemplating a price change and has asked for your advice.After some empirical investigation,you conclude that the price elasticity of demand for good X is 0.75.Your best advice to the producer would be to

The price elasticity of demand tends to be higher for goods

If a good is a normal good,it can not also be income inelastic.

The shorter the period of time consumers have to adjust to price changes,the __________ the __________ elasticity of demand.

Exhibit 20-2 -Refer to Exhibit 20-2.The market for good X is initially in equilibrium at $5.The government then places a per-unit tax on good X,as shown by the shift of S1 to S2.What is the per-unit tax equal to?

When the cross elasticity of demand between two goods is __________,the goods are __________.

If the seller of good X raises the price of good X,it follows that the total revenue of good X will __________,if demand is __________.

Exhibit 20-7 -Refer to Exhibit 20-7.If the government wants to impose a per-unit tax in order to raise revenues,which of the depicted markets should it choose in order to maximize tax revenues?

Exhibit 20-3 -Refer to Exhibit 20-3.When price decreases from $4.50 to $3.50,the price elasticity of demand is

If the demand for a good is inelastic and the price of the good decreases,then

Exhibit 20-7 -Refer to Exhibit 20-7.If the government is contemplating imposing a per-unit tax and it wants the tax to have as small a negative effect on consumers as possible,it should choose a good for which the market is depicted on graph

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Macroeconomic Measurements: Prices and Unemployment

Macroeconomic Measurements: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability: A Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money, Banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, Technology, Ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,Unions,and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

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International Finance

Globalization and International Impacts on the Economy

The Economic Case For and Against Government: Five Topics Considered

Stocks, Bonds, Futures, and Options

Agriculture: Problems, Policies, and Unintended Effects

Filters

Exhibit 20-2 -Refer to Exhibit 20-2.The market for good X is initially in equilibrium at $5.The government then places a per-unit tax on good X,as shown by the shift of S₁ to S₂.Approximately what percentage of the tax do producers end up paying?

Cross elasticity of demand measures the responsiveness of changes in the quantity of one good to changes in .

If demand is elastic,then a given percentage change in price will bring about a(n) percentage change in quantity .

The shorter the period of time consumers have to adjust to price changes,the the elasticity of demand.

Exhibit 20-2 -Refer to Exhibit 20-2.The market for good X is initially in equilibrium at $5.The government then places a per-unit tax on good X,as shown by the shift of S₁ to S₂.What is the per-unit tax equal to?

When the cross elasticity of demand between two goods is ,the goods are .

If the seller of good X raises the price of good X,it follows that the total revenue of good X will ,if demand is .